Technical Update: Headwinds Building?

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What’s in Today’s Report:

  • Technical Update:  Headwinds Building?

Futures are modestly lower following mixed Chinese economic data as markets digest Thursday’s rebound.

Chinese economic data was mixed but not worse than feared, as Industrial Production beat estimates (3.9% vs. (E) 1.5%) while Retail Sales and Fixed Asset Investment both declined sharply (-7.5% and –3.8% respectively) but no worse than expected.  In sum the data was “good enough” to keep hope alive that the U.S. economy can see a substantial economic rebound in the coming months, assuming no “second wave” of virus infections.

Today will be an important day for economic data, and the reports we’re watching today (in order of importance) are: Empire State Manufacturing Survey (E: -65.0), Retail Sales (E: -11.2%), Consumer Sentiment (E: 66.0), Industrial Production (E: -11.5%), and JOLTS (E: 5.900MM).

Empire Manufacturing Report and Consumer Sentiment are May reports, so markets will want to see hints of improvement to confirm the economic “worst” will soon be behind us.  If that happens, stocks can hold Thursday’s gains.

What Happens to Markets If There’s a “Prolonged Recession?”

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What’s in Today’s Report:

  • What Happens to Markets If There’s A “Prolonged Recession?”
  • EIA & Oil Update – Can the Bounce Continue?

Futures are little changed as markets digest Wednesday’s uptick in concern about future economic growth and the subsequent market selloff.

Positively, corporate news was solid overnight as CSCO earnings were fine and Mastercard said it’s starting to see the beginning of a recovery in certain sectors.

Economic data was sparse overnight as the only notable number was German CPI, which rose 0.4% vs. (E) 0.3%.

Today, the key will again be the Jobless Claims data (E: -2.500MM).  First and foremost, claims need to continue to decline from the previous week, and if the number beats estimates that will help offset some of the concerns about future growth.  There are also two Fed speakers today, Kashkari (1:00 p.m. ET) and Kaplan (6:00 p.m. ET), but neither should move markets given we heard from Powell yesterday.

Tom Essaye Intereviewed with Yahoo Finance on May 13, 2020

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Tom Essaye interviewed with Yahoo Finance’s Alexis Christoforous & Brian Sozzi, discussing oil, airlines, energy, tech & more. Click here to watch the full interview.

Yahoo Finance Interview

Don’t Fight the Fed (Still)?

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What’s in Today’s Report:

  • Should We Buy LQD Now that the Fed Is Buying It Too?

Futures are staging a rebound this morning after yesterday’s late day plunge in stocks as tensions between the U.S. and China simmer while investors weigh the risk-reward dynamics of reopening global economies.

Economic data remained fairly dismal overnight but not as bad as feared with U.K. Monthly GDP dropping -5.8% vs. (E) -7.0% while EU Industrial Production fell -11.3% in March vs. (E) -12.0%. Despite the data topping estimates British 2-Yr yields notably fell to a record low of –0.045%.

Today there is just one economic report due out ahead of the open: PPI (E: -0.5%) and it shouldn’t materially move markets especially with investors primarily focused on Fed Chair Powell’s virtual participation in a webcast at 9:00 a.m. ET that will include a Q&A session at the end.

The only other catalyst on the calendar is a 30-Yr. Bond auction by the Treasury at 1:00 p.m. ET. As we saw yesterday, the very strong demand for 10 Yr. Notes pressured yields and weighed on stocks in the early afternoon and we could potentially see a repeat of that today.

Economic Breaker Panel: May Update

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What’s in Today’s Report:

  • Economic Breaker Panel: May Update

Futures are little changed this morning while international markets were mixed overnight in quiet trade as investors assess the risk-reward of reopening global economies.

Economically, China’s April PPI headline notably fell further into deflationary territory, down -3.1% from -1.5% suggesting an ongoing lack of demand throughout China’s supply chain.

Meanwhile the April NFIB Small Business Optimism Index in the U.S. dropped by less than feared to 90.9 vs. (E) 84.8 and the forward looking “6-month outlook” jumped 24 points as business owners maintain hopes for an economic rebound in the second half of the year.

Today, there is one economic report to watch: CPI (E: -0.8%) while multiple Fed officials are scheduled to speak: Bullard (9:00 a.m. ET), Quarles (10:00 a.m. ET), Harker (12:00 p.m. ET), and Mester (5:00 p.m. ET).

Finally, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and if the outcome lifts longer dated yields, the curve could further steepen out to multi-month highs which would be an encouraging development and add a tailwind to the equity markets today.

Why Are Stocks So Resilient (And Can It Continue?)

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What’s in Today’s Report:

  • Why Are Stocks So Resilient (And Can It Continue?)
  • Weekly Market Preview:  More re-openings and stimulus this week?
  • Weekly Economic Cheat Sheet:  Claims still key, but Friday’s data is also important.

Futures are modestly lower following a quiet weekend as markets digest last week’s gains.

Economic data from China continued to come in better than feared, as New Yuan Loans grew 11.5% vs. (E) 10.3% while auto sales declined just –5.5% in April compared to –40% in March.

The Chinese data continues to sew hopes for a relatively quick, “V” shaped economic recovery in the U.S., and that expectation is helping to support stocks.

Today there are no notable economic reports and just one Fed speaker, Evans (3:30 p.m. ET), so headlines on economic re-openings and a potential additional stimulus bill should drive markets (if the re-opening headlines are good and prospects for another stimulus bill continue to rise, markets should be able to continue to digest the recent rally).

Are Negative Rates Coming to the U.S.?

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What’s in Today’s Report:

  • What Negative Rates Could Mean for Markets
  • Jobs Day

Futures are modestly higher following positive headlines regarding U.S./China trade discussions.

The U.S. and China held a trade call Thursday night and stated that “good progress” was being made towards implementing phase one of the trade deal, and that headline is helping to improve sentiment towards recent coronavirus related U.S./China tension.

Economic data was light and did not moving markets as focus is on this morning’s jobs report.

Today focus will be on the jobs report and the expectations are as follows: Jobs: -21.25MM, UE Rate:  16.3%, Wages:  0.3%).  As long as the numbers are close to those estimates, stocks will be able to look past the historically awful jobs report and continue the rally.

Jobs Report Preview (Can the Market Look Past 20 Million Job Losses)?

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What’s in Today’s Report:

  • Jobs Report Preview (Could the Market Look Past 20 Million Job Losses?)
  • Why Are Treasury Yields Rising?
  • EIA Analysis and Oil Update

Futures are sharply higher thanks to better than expected Chinese export data.

Chinese exports rose 3.5% vs. (E) -11%, sparking hope that their economy is quickly getting back to “normal.”

But, in reality, data was more mixed than good as Chinese service PMIs remained weak (44.4) while German Industrial Production missed estimates –9.2% vs. (E) -6.4%.  Additionally, the better than expected Chinese export data was due in part to a surge in medical supply exports, something that’s hopefully not needed for much longer.

Today focus will be on Jobless Claims (E: 2.991MM) and has been the case for the past few weeks, continued declines from the previous week will give the market hope that the economic “worst” is behind us.

Finally, there are multiple Fed speakers today including Bostic (8:30 a.m. ET), Kashkari (12:00 p.m. ET) and Harker (E: 4:00 p.m. ET), but none of them should move markets.

Market Multiple Levels: S&P 500

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What’s in Today’s Report:

  • Market Multiple Levels S&P 500 Chart

U.S. equity futures are tracking European shares higher this morning thanks to ongoing hopes that the global economy will reopen and normalize quickly amid coordinated efforts while economic data was not quite as bad as feared overnight

Economically, the EU Composite PMI was 13.6 vs. (E) 13.5 in April while March Retail Sales declined -11.2% vs. (E) -12.0%. Both figures were considerably better than some analysts had feared helping boost risk assets.

Looking into today’s session, focus will be on the first look at April payrolls data in the U.S. in the form of the ADP Employment Report, for which the consensus analyst estimate is for a staggering drop of 20 million in private payrolls. Later in the day, Atlanta Fed President, Bostic, will speak at 1:30 p.m. ET.

While investors are primarily concerned with the economy reopening, Q1 earnings continue to roll in with several notable releases that could move markets today: SHOP (-$0.19), CVS ($1.63), GM ($0.18), SQ ($0.13), PYPL ($0.76), LYFT (-$1.08), and WYNN (-$1.05).

Current Market Catalysts (They Changed Last Week)

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What’s in Today’s Report:

  • Current Market Catalysts:  From Reopening and Remdesivir to Normalization and Nationalism
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Jobs Report This Friday)

Futures are moderately lower as U.S./China tensions rise while markets begin to shift their focus towards when the economy will return to normal.

U.S./China tension over the origin of the coronavirus rose over the weekend as Secretary of State Pompeo said there was “enormous” evidence that suggests the virus was created in a lab.

Economically, the EU manufacturing PMI slightly missed expectations, coming in at 33.4 vs. (E) 33.6.

Today there are no notable economic reports nor any Fed speakers, so markets will trade off any U.S./China coronavirus tension headlines, along with any hints of when the economy might return to some semblance of “normal” as those two issues have now become the main drivers of stocks in the near term.